The Breadth Factor: 40 Key Drivers The JSE

Research Notes January 2026 > https://www.unum.capital/post/rjan2026

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1. 🎭 Market Regime - Factor Bifurcation: The correlation between "Hard Assets" (Resources) and "Domestic Cyclicals" (Retail) has broken. Diversification is currently effective.

2. 🦴 Trend Factor - Long-Term Persistence: 65% of the universe is >200d SMA. The Structural Bull factor remains the dominant regime despite short-term noise.

3. 🔋 Momentum - Short-Term Decay: Short-term momentum (<8d EMA) is fading across 45% of the index. The "Fast Money" factor is pausing; expect mean reversion.

4. 🥇 Leading Factor - Commodity Beta: High-beta Resource stocks are exhibiting the strongest relative strength (RS) scores against the ALSI Top 40.

5. 🐌 Lagging Factor - Mega-Cap Growth: Global Tech exposure (proxy for Nasdaq) is trading below long-term baselines, acting as a massive drag on index performance.

6. 🛒 Domestic Cyclicals - Structural Breakdown: The Consumer Discretionary factor is printing new 3-month lows. Avoid exposure to "SA Inc" consumer leverage.

7. ⚖️ Index Weighting - Top-Heavy Distortion: The largest capitalization weights (Tech/Miners) are moving in opposite directions, neutralizing headline index returns.

8. 📊 Quality Factor - Divergence in Financials: "High ROE" banking assets are outperforming "Deep Value" banking assets. Quality is commanding a premium over valuation.

9. 🎢 Volatility - Regime Expansion: Volatility (ATR) is expanding in the Resource factor. This requires wider stop-loss bands for trend-following strategies.

10. 🛡️ Low Beta - Defensive Strength: Insurance and Education factors (Low Beta) are hitting new relative highs, acting as a proxy for "Safety."

11. ☠️ Tech Factor - Momentum Inversion: Moving averages in the Tech sector are in a "Death Cross" alignment. Institutional flows are actively rotating out of Growth.

12. 🔪 Distressed Value - Falling Knives: Stocks trading in the bottom decile of P/E are continuing to make new lows. "Deep Value" is currently a value trap.

13. ♻️ Rotation Trade - PGM Recovery: The Platinum Group Metals basket is reclaiming medium-term trendlines, signaling a rotation from "Laggard" to "Recovering."

14. 🪤 Yield Factor - Dividend Traps: High-yield stocks in the Tobacco/Consumer space are failing trend tests. The yield is insufficient to offset capital erosion.

15. 💎 Mid-Cap Factor - Defensive Growth: Select Mid-Cap Industrial stocks are showing lower correlation to the broad index, offering better risk-adjusted returns.

16. 📉 Entry Signal - Trend Pullbacks: High Momentum stocks retracing to the 21-day average offer the best Sharpe Ratio entries (buying strength on weakness).

17. 🧱 Resistance - Overhead Supply: The Apparel Retail factor faces heavy volume resistance. Rallies in this sector are technically being sold into.

18. 🍩 Sector Beta - Property vs. Equities: Property stocks with high retail exposure are decoupling from global bond yields (usually a correlation). Idiosyncratic risk is high.

19. 🚥 Breadth Thrust - Participation Rate: With only ~52% of stocks >8d EMA, the market lacks the "Thrust" required to confirm a sustainable broad-based rally.

20. 🏳️ Capitulation - Lack of Panic: New 3-Month Lows are contained (<8%). We have not yet seen the "Capitulation Spike" that typically marks a cyclic bottom.

21. 🦄 Relative Strength - Intra-Sector Dispersion: Even within weak sectors (Retail), "Quality" factor stocks are holding support while "Leverage" factor stocks break down.

22. 🔗 Correlation - Resource/Bank Decoupling: The historical positive correlation between Mining and Financials has inverted. This allows for long/short pair trading opportunities.

23. 🚧 Technical Floor - 200-day Sensitivity: Key "Blue Chip" Consumer stocks losing the 200d SMA suggests institutional mandates are shifting to "Underweight."

24. 🌊 Liquidity Flow - Softs to Hards: Volume analysis shows a clear rotation out of Soft Commodities (Retail/Food) into Hard Commodities (Metals).

25. 🛑 Risk Mgmt - ATR Positioning: Volatility-adjusted sizing is crucial. Reduce position size in Resources (High Vol) vs. Financials (Low Vol) to equalize risk.

26. 🚩 Chart Patterns - Bull Flag Construction: The Gold factor is consolidating near highs (low volume pullback), a classic bullish continuation setup.

27. 📏 Mean Reversion - Overbought Extremes: The "High Momentum" factor (RSI > 70) is stretched. Statistical probability favors a pause or pullback in leaders.

28. 🕳️ Mean Reversion - Oversold Persistence: The "Consumer" factor is oversold, but momentum is strongly negative. Oversold conditions are persisting, signaling a crash, not a dip.

29. 🤜 Pair Strategy - Long Beta / Short Alpha: Long "Commodity Momentum" vs. Short "Consumer Cyclicals" is the highest probability Factor Pair.

30. 👩‍⚖️ Active vs Passive - Alpha Opportunity: Index-level returns are flat due to cancellation effects. Alpha is generated solely through Factor Tilting (Sector Selection).

31. 💊 Sub-Sector Split - Pharma vs. Retail: Healthcare Retail is showing divergent trends based on valuation. Growth-priced pharma is holding better than Value-priced pharma.

32. ☎️ Telco Factor - Defensive Pivot: Telecommunications is acting as a defensive proxy, breaking out to new highs as investors seek non-cyclical cash flow.

33. 🔨 Testing Levels - Cyclical Breakouts: The "Used Goods" / Secondary Market economy is testing key resistance, acting as a counter-cyclical growth theme.

34. ⚡ Energy Factor - Trend Reversal: The Energy / Chemical complex has moved from "Value Trap" to "Trend Following" (Price > 200d SMA).

35. 📰 Materials - Paper & Forestry Lag: Unlike Metals, the Soft Commodities (Paper) factor is structurally broken, confirming the "Hard Assets Only" preference.

36. 🏢 Geo-Arbitrage - Offshore Property: Property stocks with Euro-exposure are outperforming domestic-only portfolios. The "Rand Hedge" factor is active.

37. 🌟 Size Factor - Small Cap Momentum: Specific small-cap names are exhibiting idiosyncratic momentum independent of the ALSI, driven by specific earnings stories.

38. 🥫 Staples Factor - Food vs. Apparel: Food Producers (Staples) are holding moving averages better than Apparel Retailers (Discretionary). Defensive rotation is evident.

39. 🏗️ Infra Theme - Construction Beta: The Infrastructure factor is showing broad strength, suggesting the market is pricing in future capex spend.

40. 💼 Holdco Discount - Low Volatility Exposure: Investment Holding Companies offer a lower-beta way to access the "SA Inc" factor without the single-stock volatility of retailers.

Lester Davids

Senior Investment Analyst: Unum Capital